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The Role of an Imitating Firm in a Dynamic Context

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  • Francisco Martínez-Sánchez

    ()
    (Lecturer Depto. de Teoría e Historia Económica, Universidad de Granada, Spain)

Abstract

We analyze the effects of an imitating firm on the behavior of the innovating firm. The framework of analysis used is a dynamic duopoly model of vertical product differentiation, where both the innovator and the imitator compete simultaneously in price and quality. We obtain that when the market is small, the presence of an imitator encourages the innovator to increase its innovating process, so the entry of the imitator should not be obstructed; and, when the market is large, the imitator reduces the innovator’s incentives to invest its economic resources in R&D and to provide a higher quality, so the entry of the imitator should not be encouraged.

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Bibliographic Info

Article provided by Universidad de Antioquia, Departamento de Economía in its journal LECTURAS DE ECONOMÍA.

Volume (Year): (2007)
Issue (Month): 67 (Julio-Diciembre)
Pages: 225-240

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Handle: RePEc:lde:journl:y:2007:i:67:p:225-240

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Postal: Lecturas de Economía, Departamento de Economía, Calle 67, 53-108, Medellin 050010, Colombia.

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Keywords: Leader; Imitator; Quality; Differentiation of Product; Consumer;

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  1. Bonanno, Giacomo & Haworth, Barry, 1998. "Intensity of competition and the choice between product and process innovation," International Journal of Industrial Organization, Elsevier, vol. 16(4), pages 495-510, July.
  2. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
  3. Paul Belleflamme & Cecilia Vergari, 2011. "Incentives To Innovate In Oligopolies," Manchester School, University of Manchester, vol. 79(1), pages 6-28, January.
  4. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
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